Calculate the Labour Force Participation Rate for this economy

What is the size of the labor force in this economy?


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Short Answer Questions:

1)Compute variable indicators of unemployment using the following information. Please show all of your working. If you do not, you will receive zero marks for the question(s).



a.What is the size of the labor force in this economy?

b.Calculate the Labour Force Participation Rate for this economy. Report as a percentage to two decimal places.

c.Calculate the Unemployment Rate for this economy. Report as a percentage to two decimal places.

d.Suppose that the natural rate of unemployment is considered to be 5%. What is the rate of cyclical unemployment? Report as a percentage to two decimal places.


2)Below you can find out the per capita real GDP of the 13 countries who have joined the European Union (EU), and the EU average in 1999(both in Column A). It also gives the GDP per capital growth rates in 2000 (Column B). Let us assume that countries will keep growing at the given rates until these countries reach the level of the EU average. Answer the following questions and explain your answers and show all of your working (in order to obtain partial marks).

Country Real GDP

per capita in 1999

(before joining EU)

Growth rate

of GDP per

capita in 2000 (%)

Ratio of per

capital GDP to

EU average in 1999

Years to

double this


  (A) (B) (C) (D)
EU average $25,660 2.7 1
Hungary (joined 2004) $5218 4.8 (Q2 b) (Q2 b)
The Czech Rep. (joined 2004) $5170 1.5 0.2015
Poland(joined 2004) $4257 5.7 0.1659
Slovenia(joined 2004) $9994 3.6 0.3895 77.8
Estonia(joined 2004) $4,259 5.5 0.166 25.0
Cyprus(joined 2004) $13,389 2.3 0.5218
Malta(joined 2004) $13,025 4.1 0.5076 50.0
Romania(joined 2007) $2,323 7.3 0.0905 15.2
Bulgaria(joined 2007) $1,691 4.0 0.0659 53.9
Lithuania(joined 2004) $3,420 4.3 0.1333 43.8
Latvia(joined 2004) $3,092 3.6 0.1205 77.8
Slovakia(joined 2004) $3,818 5.0 0.1488 30.4
Turkey(pending) $6,230 2.9 0.2428 350


a.Just observing the above table (doing no calculations), are there any countries that will not be able to catch up to the level of per capita income in the EU based upon the assumption we have made?


b.Fill in the information for Column C and D in the above table for Hungary (where it is marked as Q2b). And then, using the Rule of 70 from the textbook, how many years will the ratio of Hungary’s GDP to EU average GDP take to double (hint: the growth rate of a fraction is approximately equal to the growth rate of the numerator minus the growth rate of the denominator)? How many years do you think it will eventually take real GDP per capita of Hungary to reach that of EU average?


c.The above calculation in part b) is based on the assumption that a country’s real GDP grows at a constant rate. But in reality it does not. Why is that?


3)In this question you analyse the effects of the following economic policies in the loanable fund market diagram where we have real interest rate on a vertical axis and the quantity of loanable funds on a horizontal axis.

a.Start in the initial equilibrium point A in below Figure where the quantity demanded of loanable funds (IA) equals the quantity supplied of loanable funds (SA). Demonstrate and explain the effect of an increased of the government revenue in the loanable fund market. Your explanation must also include what happens to the real interest rate, the level of national savings, and the level of investment as well.


Answer here (Tips: to create new lines, simply copy the existing curves and move to the new locations)


b.You now realise that the increased government revenues (that you analysed in Part a) coming from tax increases affecting the (after-tax) profitability of new Following from your analysis in Part a), use the loanable funds model to demonstrate this policy effect and make a comparison to an analysis in Part a). You must also demonstrate your answers in Figure and explain.

Answer here (Tips: to create new lines, simply copy the existing curves and move to the new locations)


4)The level of the government debt is one of the key concerns for the government. Find the data for the government debt to GDP for recent years for Singapore (you must attach a graph or table which shows this data). Make your own observations on the data that you find. Summarise the key arguments on the debate surrounding the government debts. Your summary must address the following; what the major concern for running the government deficits, what the economic reasoning to have the balanced budget?Your summary should be at least more than a half page in length.



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